An unrenovated semi-detached house in Bondi recently sold for over $ 2.7 million. It last traded in the early 1950s, during the pre-decimal era, for around a thousand pounds.
The ‘original new condition’, three bedroom hilltop home on Sydney’s famous Beach, offers a window into the extraordinary escalation in Australian property prices.
If its value had simply kept up with the rate of consumer price inflation over those 68 years, today those 1,000 pounds would only be worth about $ 37,000.
It’s not hard to see why the level of homeownership – once a hallmark of Australian society – has plummeted.
“We expected the magic number to be around $ 2.5 million to buy it. That’s what we heard through the agent,” said Rob Stanley, an agent. purchase acting for a couple with a toddler who was interested in the home.
âFor the auction, we were expecting five or six registered bidders. It turned out that there were 17 of them.
“With so much interest, it continued, it continued, and the fear of missing something was there.”
It’s Bondi, go figure, some might say, but the price hike is widespread.
In June, official estimates from the Australian Bureau of Statistics put the average price of housing in Australia – apartments and houses combined – at $ 836,000. Prices have continued to increase since.
“These are the biggest increases in house prices in 31 years,” said Eliza Owen, research manager at real estate data company CoreLogic.
By the end of the year, it could be the biggest annual house price hike on record in Australia.
Home values ââhave skyrocketed in every capital city and regional and coastal towns as well, as people freed from the need to work in the office exodus from towns and closures.
All of this has compounded an already existing housing affordability crisis that excludes young and low-income people from Australia’s dream of homeownership.
“What is really striking is the drop in the homeownership rate among those under 45,” said economist Saul Eslake.
He says that in the 2016 census, the homeownership rate for people under 45 was lower than it was in the 1954 census.
“I suspect that when the 2021 results are released, the homeownership rate for young Australian adults – that is, between their 20s and mid-30s – will be lower than it was. in the 1947 census. “
Jason Falinski, a backbench MP for the federal Liberal Party who is chairing a parliamentary inquiry into housing affordability, calls it a “moral failure.”
“We have created some of the least affordable housing in the world,” Falinski said.
âIt’s akin to intergenerational theft.
Soaring house prices stand in stark contrast to wage growth, which has stagnated for years. Nationally, over the past year, the cost of an mid-priced home has increased by about $ 2,500 per week.
In the greater Sydney area, it has increased by $ 5,600 per week.
Try to get a pay raise for that.
It wasn’t always like that. For much of the 20th century, homes were much more affordable.
âBetween the years immediately following World War II andâ¦ and the early 1970s, houses cost essentially three times the average weekly wage for men. And that ratio hasn’t really changed much over a period of almost 30 years old, âMr. Eslake said.
Today, house prices and wages have completely decoupled.
So what has changed?
In another old house on the market for the first time in decades, Four Corners found evidence that points to one of the big changes that have driven home prices up.
Underneath the flooring was an old newspaper from 1963. At first glance, the headline seemed to imply that things weren’t that different then. He said, âWhy can’t young couples buy a house?
Read the fine print, however, and it tells a different story.
The problem then was that the banks were tightly controlled and loans were strictly rationed.
First-time buyers had to pay huge down payments – up to a third of the property’s value – and banks were extremely careful about how much they would lend.
Not enough “cheap” money available, the article complained.
That all changed in the 1990s because of two things: the deregulation of the banking system and a huge drop in interest rates after the era of high inflation crashed.
Suddenly the banks were ready to lend people huge sums of money to buy houses, and lower interest rates meant people could borrow a lot.
In markets where supply is limited, the combination of easy credit and cheap money has encouraged people competing for housing to borrow more and more.
This was supercharged in the COVID-19 era by the lowest interest rates in history.
The result is that house prices in Australia have risen 550 percent since the early 1990s, with no slowdown in sight.
Rising house prices have created many winners.
âFor a majority of Australians, the real estate market has been an escalator to ever higher levels of personal wealth. And, if you have been able to climb that escalator at the bottom of the ladder, you have done exceptionally well over the years. 30 years, âsaid Mr. Eslake.
âIf you were able to access it at different times during that time, you shared those gains as well. But, if you are part of a growing minority of Australians who have not been able to get the first foot on this escalator , you missed something. “
The housing gap between the haves and the have-nots is often seen as a generational gap, but the reality is that many young people will be helped in the real estate market by their parents – mom and dad’s bank – and many will also inherit enormous wealth. generated by soaring real estate prices.
The real losers are those who don’t come for the money.
People like Ashley May, who works as a mental health nurse in Hobart and lives in social housing with her mother, who lives with a disability. Ashley longs to buy a house for both of them.
She has a masters degree, a good job, and she assumed she would be able to save money and buy a house. But, in the midst of soaring house prices in once affordable Hobart, its price has been overtaken.
“The situation left me completely defeated, you know, like it was no use,” she laments. âI did everything right. I did everything every politician ever told us to do.
“We were told, growing up, that, you know, the Australian dream of owning your own home, all you have to do to get it is go to school, college, college, or college. college, get a good job, and boom, Bob is your uncle. But it didn’t turn out like that. “
Adrian Pisarski, chief executive of housing advocacy group National Shelter, believes the problem will only get worse.
“People who come from poorer backgrounds won’t do it. It really has become a class divide.”
A nation that once prided itself on its egalitarianism and high levels of homeownership is experiencing growing inequalities, due to a growing wealth chasm between those who own a home and those who never will.
âHousing has become, rather than a place of safety where you raise a family, something that you seek to build wealth from and that you speculate on,â Pisarski said.
“So that’s a really big change over the last 40 years. And I think it won’t serve the future well.”
Additional reporting by Lesley Robinson and Patrick Begley.